Markets got rocked on Thursday. The Dow’s 317-point plunge put the index in the red for the year.

And there appears to be no shortage of worries to have investors a bit freaked out.

“Disturbing geopolitical events are now added to a list of fundamental investor concerns (QE tapering, a chronic shortage of sensible investment opportunities, weak inflation, lackluster profit growth, etc.) that in our view were largely being ignored by investors desperate for yield,” Societe Generale’s Andrew Lapthorne said in a note to clients Friday. “However this investor complacency encouraged and supported by low asset volatility, buoyant equity prices and extremely low bond yields is increasingly being tested.”

The hottest topic lately seems to be the mixed signals sent by wage data, which are directly tied to employment and inflation.

Here’s your Monday Scouting Report:

Top Story

The Wage Gain Rollercoaster: Traders agreed that the catalyst for Thursday’s sell-off was the employment cost index (ECI) report, which showed that wages jumped 0.7% in Q2. This was the biggest jump since 2008.

It’s a big deal, because it’s both a sign of inflation and labour-market tightness, two forces that put pressure on the Federal Reserve to tighten monetary policy sooner than later. The prospect that the Fed could tighten monetary policy sooner than expected is frequently blamed for causing market volatility. The idea is that if the Fed tightens, then it pulls liquidity out of the credit markets, which indirectly would pull liquidity out of the stock markets.

“The average hourly earnings data in July appear to suggest no extension of the Q2 ECI upside carried over into Q3,” said Morgan Stanley’s Vincent Reinhart. “Moreover, aggregate earnings in July slowed to just 0.2% from gains that averaged 0.5% in the first half of the year, suggesting slower growth in the aggregate income needed to fuel spending.”

“The Fed will not attempt to raise rates before convincing and sustainable wages increases occur,” he added.

Economic Calendar

Senior Loan Officer Opinion Survey (Mon): The Federal Reserve will publish its latest report on lending standards at 2:00 p.m. ET. Here’s Credit Suisse: “Over the past three years, the Fed’s July Senior Loan Officer survey has contained a special question on how each bank’s lending standards have varied between 2005 and the present. We may see that question repeated in Monday’s report. In July 2013, domestic banks reported that their business lending standards were at levels that were easier than the midpoints of the ranges that those standards had occupied since 2005. But standards on CRE loans and loans to households reportedly were tighter than the midpoints of their respective ranges”

Markit Services PMI (Tues): Economists estimate this index of service sector activity index was unchanged at 61.0, signaling a healthy pace of growth. “[L]atest PMI figures provide an early signal that robust growth momentum has been sustained into the third quarter, setting the U.S. economy firmly on course to recover some of the ground lost earlier in the year,” said Markit’s Tim Moore.

ISM Non-Manufacturing (Tues): Economists estimate this index of activity climbed to 56.5 in July from 56.0 in June. Bank of America Merrill Lynch economists, however, expect the index to fall to 55.0. “The nonfarm payroll report showed a decrease in the pace of hiring at services-providing businesses, which points to a slowdown in the sector,” they said. “Furthermore, we think the sharp drop in the Chicago PMI suggests downside risk to the services sector. Remember that the Chicago PMI is not solely a manufacturing index but reflects broader economic activity. Given that national manufacturing conditions strengthened in July, the decline in Chicago may have owed to weaker nonmanufacturing activity.”

Factory Orders (Tues): Economists estimate orders climbed 0.6% in June after falling 0.5% in May. “Last week, we saw that durable goods orders, which account for just under half of total factory orders, rebounded 0.7 per cent in June, with an even more impressive read on core capital goods orders (up 1.4 per cent),” said Wells Fargo’s John Silvia. “Orders for nondurable goods were likely a bit softer after data from the Federal Reserve showed production slipping the past two months. However, after orders fell in May, we expect at least a modest bounce back. Purchasing managers’ indices, including the ISM manufacturing index, remain firmly in expansion territory and signal that the trend in the factory sector remains positive.”

Trade Balance (Wed): Economists estimate the trade balance widened to $US4.5 billion in June from $US44.4 billion in May. “As the U.S. economy has picked up in recent months, the country’s appetite for imports has increased,” said Wells Fargo’s Silvia. “Despite last month’s drop, we expect the trend of rising imports to have continued in June. Container data suggest exports also rose over the month, but to a more modest extent, generating the slightly larger trade deficit.”

Initial Jobless Claims (Thurs): Economists estimate weekly initial claims ticked up to 305,000 from 302,000 a week ago. “Claims appear to have reached a nadir at around 300k, which suggests that an acceleration in hiring will be needed to spur payroll growth,” said Nomura economists.

Consumer Credit (Thurs): Economists estimate credit balances increased by $US18.25 billion in June. “Retail sales ex-auto were up another 0.4% mum in June, which suggests continued, steady momentum in revolving credit,” said Bank of America Merrill Lynch economists. “Vehicle unit sales were strong in the month, which suggests that non-revolving credit is likely to continue to expand. The extension of student loans by the federal government also should boost non-revolving credit, although at a slower pace than the prior month.”

Market Commentary

On Friday, Deutsche Bank’s David Bianco revised his house views position on stocks “to neutral from cautious.”

“The S&P’s PE premium vs. history stands on the shoulders of bonds and also dampened summer volatility despite various growth and geopolitical concerns,” he wrote. “However, this week’s combination of reports with accelerating US GDP, strong job gains and rising labour costs suggest that the pricing of uncertainties in risk assets is being reexamined given likely rising treasury yields; which cuts into existing risk spreads and puts focus on fair spreads with more normal Rf rates.”